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Why Is American Airlines (AAL) Down 6.7% Since the Last Earnings Report?
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It has been about a month since the last earnings report for American Airlines Group, Inc. (AAL - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Fourth Quarter Earnings
American Airlines Group's fourth quarter 2016 earnings (adjusted) of $0.92 per share were in line with the Zacks Consensus Estimate. Quarterly earnings decreased significantly year over year. Higher costs hurt the bottom line.
Revenues of $9,789 million were 1.7% above the year-ago figure and edged past the Zacks Consensus Estimate of $9,765.5 million. Total revenue per available seat miles (TRASM) improved 1.3% in the reported quarter. This was the first quarter in which the metric grew on a year-over-year basis since the fourth quarter of 2014. Consolidated yield improved 1.8%. Passenger revenue per available seat miles improved 0.2% . Traffic was down 1.3%, whereas capacity was up 0.4%. This resulted in relatively empty planes. Consolidated load factor (percentage of seats filled by passengers) declined as traffic contracted and capacity expanded. Load factor deteriorated to 81.4% from the comparable year-ago figure of 82.7%.
Total operating expenses climbed 5.4% year over year to $9 billion primarily due to an increase in labor costs. Expenses pertaining to salaries and benefits surged 17.4%. Consolidated operating costs per Available Seat Mile (CASM: excluding special items) increased 7.6%.
During the quarter, the company returned $606 million to its shareholders through the payment of $52 million in dividends and buyback of shares worth $554 million. Furthermore, the carrier also declared a dividend of $0.10 per share. The dividend will be paid on Feb 27, 2017, to the shareholders as of Feb 13. The carrier also approved a new $2 billion buyback program, which is scheduled to expire on Dec 31, 2018. The carrier has returned more than $9.6 billion to stockholders through share repurchases and dividends since mid-2014. We are impressed by the company’s shareholder-friendly initiatives.
Outlook
The company expects TRASM for the first quarter of 2017 to be up in the band of 2.5–4.5% (year over year). American Airlines expects pre-tax margin excluding special items in the first quarter to be approximately in the range of 3–5%. Consolidated CASM (excluding fuel and special items) is projected to increase 9% in the first quarter. The metric is expected to increase around 4% in 2017. Capacity (system) in 2017 is projected to increase 1% in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted 22.38% downward due to these changes.
At this time, American Airlines' stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is American Airlines (AAL) Down 6.7% Since the Last Earnings Report?
It has been about a month since the last earnings report for American Airlines Group, Inc. (AAL - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Fourth Quarter Earnings
American Airlines Group's fourth quarter 2016 earnings (adjusted) of $0.92 per share were in line with the Zacks Consensus Estimate. Quarterly earnings decreased significantly year over year. Higher costs hurt the bottom line.
Revenues of $9,789 million were 1.7% above the year-ago figure and edged past the Zacks Consensus Estimate of $9,765.5 million. Total revenue per available seat miles (TRASM) improved 1.3% in the reported quarter. This was the first quarter in which the metric grew on a year-over-year basis since the fourth quarter of 2014. Consolidated yield improved 1.8%. Passenger revenue per available seat miles improved 0.2% . Traffic was down 1.3%, whereas capacity was up 0.4%. This resulted in relatively empty planes. Consolidated load factor (percentage of seats filled by passengers) declined as traffic contracted and capacity expanded. Load factor deteriorated to 81.4% from the comparable year-ago figure of 82.7%.
Total operating expenses climbed 5.4% year over year to $9 billion primarily due to an increase in labor costs. Expenses pertaining to salaries and benefits surged 17.4%. Consolidated operating costs per Available Seat Mile (CASM: excluding special items) increased 7.6%.
During the quarter, the company returned $606 million to its shareholders through the payment of $52 million in dividends and buyback of shares worth $554 million. Furthermore, the carrier also declared a dividend of $0.10 per share. The dividend will be paid on Feb 27, 2017, to the shareholders as of Feb 13. The carrier also approved a new $2 billion buyback program, which is scheduled to expire on Dec 31, 2018. The carrier has returned more than $9.6 billion to stockholders through share repurchases and dividends since mid-2014. We are impressed by the company’s shareholder-friendly initiatives.
Outlook
The company expects TRASM for the first quarter of 2017 to be up in the band of 2.5–4.5% (year over year). American Airlines expects pre-tax margin excluding special items in the first quarter to be approximately in the range of 3–5%. Consolidated CASM (excluding fuel and special items) is projected to increase 9% in the first quarter. The metric is expected to increase around 4% in 2017. Capacity (system) in 2017 is projected to increase 1% in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted 22.38% downward due to these changes.
American Airlines Group, Inc. Price and Consensus
American Airlines Group, Inc. Price and Consensus | American Airlines Group, Inc. Quote
VGM Scores
At this time, American Airlines' stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.